Continuing to digest political events

With little in the way of new news this morning other than better expected economic activity during the UK's November lockdown, markets have continued to digest the events of yesterday and overnight.

• During the Asian session Treasuries rallied as the market reacted to little new news from Biden's stimulus plan. Bunds and gilts showed little reaction to this news however and through the European morning session core bond yields have declined as risk sentiment seems to have improved.
• We have also seen most peripheral spreads in the Eurozone tighten, led by BTP spreads. 10-year BTP-Bund spreads are 4bp tighter on the day at writing, reversing some of the politically-driven spread widening seen over the past few days. Consensus has shifted to thinking that the PM Conte can continue on in his current role for at least the short-term with support from across the political spectrum.
• TY1 futures are up 0-3+ today at 136-21+ with 10y UST yields down -1.8bp at 1.112% and 2y yields up 0.1bp at 0.142%.
• Bund futures are down -0.25 today at 177.59 with 10y Bund yields up 1.0bp at -0.540% and Schatz yields up 0.3bp at -0.729%.
• Gilt futures are down -0.16 today at 134.28 with 10y yields up 1.0bp at 0.300% and 2y yields down -0.2bp at -0.129%.